Notes to the Condensed Financial Statements
March 31, 2016
(Unaudited)
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the
Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary
to present fairly the financial position, results of operations, and cash flows at March 31, 2016, and for all periods presented
herein, have been made.
Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 2015 audited financial statements. The results of operations
for the periods ended March 31, 2016 and 2015 are not necessarily indicative of the operating results for the full years.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements have been prepared
in accordance with generally accepted accounting principles in the United States of America and are stated in US dollars. Because
a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements
for a period necessarily involves the use of estimates which have been made using careful judgment. Actual results may differ from
these estimates.
Reclassification of Financial Statement
Accounts
Certain amounts in the condensed financial
statements have been reclassified to conform to the presentation adopted in the March 31, 2016 condensed financial statements.
Use of Estimates
The preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reportable amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Basic Loss Per Share
Basic earnings (loss) per share is calculated
by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during
the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders
by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding
is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There were no dilutive or potentially
dilutive instruments outstanding as of March 31, 2016 and December 31, 2015.
Stock Issued in Exchange for Services
The valuation of common stock issued in exchange
for services is valued at an estimated fair market value as determined by the most readily determinable value of either the stock
or services exchanged. Values of the stock are based upon other sales and issuances of the Company’s common stock within
the same general time period.
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FormCap Corp.
(A Development Stage Company)
Notes to the Condensed Financial Statements
March 31, 2016
(Unaudited)
Cash and Cash Equivalents
Cash equivalents are comprised of certain highly
liquid investments with original maturities of three months or less when purchased. The Company maintains its cash in bank deposit
accounts which at times may exceed federally insured limits of $250,000. The Company has not experienced any losses related to
this concentration of risk. Deposits did not exceed insured limits during three months ended March 31, 2016 and the year ended
December 31, 2015.
Financial Instruments
For accounts receivable, accounts payable,
accrued liabilities, current portion of long-term debt and long-term debt, the carrying amounts of these financial instruments
approximates their fair value. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
Foreign Currency Translation
The Company translates foreign currency transactions
and balances to its reporting currency, United States Dollars, in accordance with ASC 830 “Foreign Currency Matters”.
Monetary assets and liabilities are translated into the functional currency at the exchange rate in effect at the end of the year.
Non-monetary assets and liabilities are translated at the exchange rate prevailing when the assets were acquired or the liabilities
assumed. Revenue and expenses are translated at the rate approximating the rate of exchange on the transaction date. All exchange
gains and losses are included in the determination of net income (loss) for the year.
Income Taxes
The Company applies ASC 740, which requires
the asset and liability method of accounting for income taxes. The asset and liability method requires that the current or deferred
tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws
to determine the amount of taxes payable or refundable currently or in future years. Deferred tax assets are reviewed for recoverability
and the Company records a valuation allowance to reduce its deferred tax assets when it is more likely than not that all or some
portion of the deferred tax assets will not be recovered.
The Company adopted ASC 740, at the beginning
of fiscal year 2008. This interpretation requires recognition and measurement of uncertain tax positions using a “more-likely-than-not”
approach, requiring the recognition and measurement of uncertain tax positions. The adoption of ASC 740 had no material impact
on the Company’s financial statements.
NOTE 3 - RECENTLY ENACTED ACCOUNTING STANDARDS
In June 2014, the FASB issued ASU 2014-10,
“Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment
to Variable Interest Entities Guidance in Topic 810, Consolidation”. The guidance eliminates the definition of a development
stage entity thereby removing the incremental financial reporting requirements from U.S. GAAP for development stage entities, primarily
presentation of inception to date financial information. The provisions of the amendments are effective for annual reporting periods
beginning after December 15, 2014, and the interim periods therein. However, early adoption is permitted. Accordingly, the Company
has adopted this standard as of June 30, 2015.
The Company does not expect the adoption of
any other recent accounting pronouncements to have a material impact on its financial statements.
7
FormCap Corp.
(A Development Stage Company)
Notes to the Condensed Financial Statements
March 31, 2016 (Unaudited)
NOTE 4 - GOING CONCERN
The Company's financial statements are prepared
using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established
an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until
it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the
Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company
by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking
equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing
any of its plans.
The ability of the Company to continue as a
going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually
secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 5 - P
ROMISSORY
NOTE RECEIVABLE - RELATED PARTY
On June 3, 2013 the Company
advanced the sum of $11,194 ($11,500 Canadian Dollars) to a related Canadian company. The loan is secured by a promissory note
and is due on December 31, 2014. During the year the Borrower repaid $1,097 leaving a balance of $8,170 as of March 31, 2016.
The promissory note is non-interest bearing
until maturity and bears interest at 3% per annum thereafter. The Promissory note will become due and payable if the borrower receives
financing totaling $5,000,000 in aggregate prior to the maturity date. The promissory note is convertible into common shares of
the company either in whole or in part at the option of the Company.
NOTE 6 - EXPLORATION PROPERTY LEASE
On November 19, 2013 the Company executed a
Definitive Agreement with Kerr Energy Group and Keta Oil & Gas LLC (Kerr and Keta) both incorporated in Kansas.
Pursuant to the terms of the Agreement the
Company agreed to acquire up to 2,400 acres in Cowley County, Kansas at a cost not exceed $200 per acre. In addition, the Company
agreed to issue Kerr and Keta a total of 200,000 Rule 144 shares of the common stock of FormCap.
The Company will own 100% of the Leases (80%
net revenue to FormCap; 20% freehold royalty), and will be the operator. The Company will have the option to purchase additional
leases in Cowley County from Kerr and Keta under an Area of Mutual Interest, the terms of which are set forth in the Agreement.
FormCap is required to drill one test well in each of the first two years of the lease term in order to maintain its interest in
the Leases.
8
FormCap Corp.
(A Development Stage Company)
Notes to the Condensed Financial Statements
March 31, 2016
(Unaudited)
During January 2014, Ironridge Global IV, Ltd.
("Ironridge") purchased from Kerr and Keta the Company’s obligation in the aggregate amount of $671,938.90 (the
"Claim Amount"). Subsequently, the Company offered to settle the Claim Amount by the issuance of unrestricted and fully
tradable shares of the Company's common stock. Ironridge accepted the Company's settlement offer, subject to a hearing on the fairness
of the settlement terms. On February 21, 2014, the Company, Ironridge and the CEO of the Company entered into a Stipulation Order
for the settlement on the terms agreed on by Ironridge and the Company. On February 21, 2014, a California Superior Court for the
County of Los Angeles (the "State Court") held a hearing on the fairness of the Company's settlement offer to Ironridge.
Pursuant to the court order issued by the State Court on February 21, 2014, the shares of the Company's common stock will be deemed
issued in settlement of the claims (subject to certain adjustments based on the future trading value of the stock) when delivered
to Ironridge. On February 24, 2014 the Company's transfer agent delivered to Ironridge 10,000,000 shares of the Company's common
stock. The shares issued to Ironridge are freely tradable and exempt from registration under the Securities Act of 1933 and the
California Corporations Code. The number of shares to be issued to Ironridge is subject to adjustment based trading price of the
Company's stock such that the value of the shares is sufficient to cover the Claim Amount, a 10% agent fee amount and Ironridge's
reasonable legal fees and expenses ( the "Final Amount"). Under the Stipulation Order, Ironridge may not be the beneficial
owner of more than 9.99% of the Company's outstanding shares of common stock until the Final Amount is paid. Further Ironridge
has agreed not to exercise any voting rights of the shares issued to it nor influence or cause any change in control of the Company.
On March 11, 2014 Ironridge paid Kerr and Keta
$305,000 in full and final settlement of all monies due in connection with the acquisition of 2,400 acres of the Cowley leases.
Ironridge was obligated to provide $367,000 to the Company to fund the drilling of two test wells on the Cowley lands within 90
days of the issuance of the shares of Common stock. On May 24, 2014, Ironridge defaulted upon its obligation to fund the two test
wells and on July 3, 2014, Ironridge was deregistered. Accordingly, the Company has recorded an impairment of the obligation of
$367,000 that Ironridge had pledged to pay towards drilling expenses for Keta and Kerr.
As at March 31, 2016 the Company has capitalized
$1,663,008 toward the acquisition of the Cowley Leases.
NOTE 7 - RELATED PARTY PAYABLES
The Company from time to time has borrowed
funds from or has received services from several individuals and corporations related to the Company for operating purposes. As
at March 31, 2016 the Company owed related parties $111,500 (December 31, 2015 - $111,500). These amounts bear no interest,
are not collateralized, and are due on demand.
NOTE 8 - PROMISSORY NOTES PAYABLE
As at March 31,
2016 the Company owed $52,059
to several unrelated third parties (December 31, 2015 -
$52,059). These amounts bear no interest, are not collateralized and are due on demand.
NOTE 9 - PROMISSORY NOTES PAYABLE – RELATED PARTIES
As at March 31, 2016 the Company owed $111,500
to several related parties (December 31, 2015 - $111,500) to several third parties. These amounts bear no interest, are not collateralized
and are due on demand.
NOTE 10 - CONVERTIBLE PROMISSORY NOTES PAYABLE
On January 23, 2014, an unrelated third party
paid Kerr and Keta a further $50,000 in connection with the acquisition of the Cowley leases. On that date the Company issued a
promissory note in the amount of $50,000 to the unrelated third party.
On February 28, 2014 the Company issued a promissory note in the
amount of $11,000 to an unrelated party. The note matures on December 31, 2015.
As at March 31, 2016, the Company owed $149,450
to the holders of the Convertible Promissory notes (December 31, 2015 - $149,450).
The promissory notes are non-interest bearing
until maturity and bear interest at 3% per annum thereafter. The Promissory notes will become due and payable if the Company receives
financing totaling $5,000,000 in aggregate prior to the maturity date. The promissory notes are convertible into common shares
of the Company either in whole or in part at the option of the Holders.
9
FormCap Corp.
(A Development Stage Company)
Notes to the Condensed Financial Statements
March 31, 2016
(Unaudited)
NOTE 11 - CONVERTIBLE PROMISSORY NOTES PAYABLE – RELATED
PARTY
On January 2, 2014, a related party paid Kerr
and Keta a further $50,000 in connection with the acquisition of the Cowley leases. On that date the Company issued a promissory
note in the amount of $50,000 to the related party.
On May 19, 2014 a related party paid certain
creditors $7,000. On that date the Company issued a promissory note in the amount of $7,000 to the related party.
On July 28, 2014 the Company issued a promissory
note in the amount of $5,000 to a related party. The note matures on December 31, 2015
On August 11, 2014 a related party paid a certain
creditor $2,500. On that date the Company issued a promissory note in the amount of $2,500 to the related party.
As at March 31, 2016, the Company owed $113,490
to related party holders of Convertible Promissory Notes (December 31, 2015 - $113,490)
The promissory notes are non-interest bearing
until maturity and bear interest at 3% per annum thereafter. The Promissory notes will become due and payable if the Company receives
financing totaling $5,000,000 in aggregate prior to the maturity date. The promissory notes are convertible into common shares
of the Company either in whole or in part at the option of the Holder.
NOTE 12 - COMMON STOCK
The Company has two classes of stock authorized
as of March 31, 2016. The Company has 50,000,000 shares of preferred stock authorized with no shares outstanding as of March 31,
2016 and December 31, 2015. The Company also has 200,000,000 shares of common stock authorized with 88,841,833 shares issued and
9,223,822 outstanding as of March 31, 2016 (December 31, 2015 – 9,223,822)
On July 31, 2014, the Company effected a 1
for 10 reverse stock split. All references in these financial statements to number of common shares issued and outstanding, price
per share and weighted average number of common shares have been adjusted to reflect the stock split on a retroactive basis, unless
otherwise noted. The Company’s authorized preferred stock and authorized common stock remain unchanged.
During the nine months ended September 30,
2014, the Company issued 1,000,000 shares of common stock in connection with the purchase of the Cowley leases.
On August 27, 2014, the Company entered in
to a contract for financial consulting and advisory services for a six month term, expiring on January 27, 2015. The Company agreed
to issue 500,000 restricted shares as compensation to the consultants which was valued using fair market value of the stock price
on that date for a total compensation expense of $54,950.
On August 27, 2014, the Company entered in
a debt settlement agreement with a related party. The Company agreed to settle a debt of $10,000 by the issuance of 50,000,000
shares of common stock. The Company recorded a loss of $5,495,000 on this transaction.
On September 3, 2014, the Company entered into
an escrow agreement with a creditor. The Company agreed to pay the creditor $2,500 upon the signing of the agreement and to issue
75,000 shares to be held in escrow. The Company is obligated to pay the creditor a further $7,514 forty five days after the Company’s
stock becomes DWAC-eligible. Upon payment of the final amount owing the shares will be returned to the Company.
On December 4, 2014, the Company entered in an Assignment of Creditors and Settlement of Debt agreement. The Company agreed to
settle Convertible Promissory Notes Payable in the amount of $62,000 and Notes Payable in the amount of $26,594 by the issuance
of 28,000,000 shares of common stock valued at $532,000. The Company recorded a loss of $471,406 on this transaction.
During 2014, the company determined that
the $17,00 subscription receivable for shares issued in 2007 was uncollectible. The resulting write-off of this amount has been
recorded in loss on settlement of debt.
NOTE 13 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events
from the balance sheet date through the date the financial statements were issued and has determined that there are no items to
disclose.
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